Jun 18, 2019
In a major boost for Australians, tax cuts are locked in for the next few years. So what should you do with the money?
Wise tax return plans
In May of 2019, ME Bank surveyed some 1000 Australians to see what their goals were for using their tax return.
The majority of those surveyed, 48% of the respondents, said they intended to save their return.
32% said they planned on putting their return towards any debts they owed.
19% of respondents will use their return for normal non-discretionary expenses such as utility bills.
And last of all, 17% said they intended to splurge and use their returns for shopping, eating out or going on holiday.
This survey shows that many Australians are making wise use of their tax returns by saving them.
How should you use your return this year?
Keep in mind that your return is not money the government is paying to you. It is, after all, a tax refund on tax you've already paid, not a gift.
With that fact in mind, how can you make the best use of your hard-earned money instead of just spending it all?
Pay off your debts
The very first option you should always consider whenever you run into extra cash is paying off your debts.
The longer you have debt hanging around, the more money you’ll lose in fees and interest payments so it makes sense to clear away your debt as soon as possible. True, paying off old debts for things you already own isn’t as fun or glamourous as using your tax return on a shopping spree, but it’s the smart thing to do if you want to stabilise your finances.
Refresh or renovate your home
While you have the cash in hand, why not put your tax return towards increasing the value of your home? Even a modest return provides a great opportunity to pay for a fresh coat of paint or some new outfittings.
Invest the money in your future
Why not put your tax return into an investment? The larger your return, all the better to invest with. But there are other ways you can invest even a small amount of cash.
Deposit the funds in a high-interest savings account or a term deposit account and watch that extra money grow over time.
Invest in yourself. Use your return to buy educational books, online courses and subscriptions to boost your skills and knowledge so that you can improve your career prospects and earn more.
Investing your return is a great way to transform a small refund into a huge opportunity for financial and personal growth.
Pay for that major purchase you couldn’t afford earlier
Does your vehicle need to have an expensive part replaced? Is one of your kids in need of dental treatment you couldn’t afford a few months ago? Why not use your return to fund one of those large expenses?
Boost your business
If you have a small business that could use a boost, then use your return to invest in new tech, software or a service to boost the efficiency and performance of your company.
Donate your return
Giving back by donating your return to charity makes you feel good about helping a cause that you’re passionate about. It also helps you qualify for more tax breaks next year.
Pad your emergency fund
If you can’t think of anything else to do with your tax return, at the very least you should set it aside as emergency money. It’s advisable to have an emergency fund that can cover your family’s needs through at least six months of zero income so contributing your tax return to that is a smart move.
Written by Ben Calder, Private Client Adviser at Calder Wealth Management.
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